El Niño: Party Time for California Almond Growers

The raging El Niño Southern Oscillation, a band of warm ocean water in the central and east-central equatorial Pacific, is about to cause droughts in southern Asia–and to bring enough rain to boost California almond production after years of drought-induced decline.

Almond demand has been one of the prime beneficiaries of the China economic boom as Chinese wages and discretionary consumption spending took off after 2005. Chinese purchases of imported U.S. almonds grew by nearly 700 percent between 2005 and 2010.

In the last five years, almond popularity has continued to grow throughout Southeast Asia. India has led the way, with demand hitting a record 60,000 tons this season, but demand across Asia is expected to grow by 8 percent over the next two years, according to the U.S. Department of Agriculture.

California has long dominated the 1-million-ton global supply of almonds. But since the droughts began in 2011, California almond production has fallen by 7 percent to 848,000 tons, according to the Department of Agriculture. Falling production has been pushing up almond prices from about $3.30 a pound last year to the mid-$4 range.

Australia has been filling this growing, lucrative void as its almond production jumped by 90%, to a record 80,000 tons. According to the Australian Bureau of Agricultural and Resource Economics and Sciences, exports to China of Australian tree nuts, of which almonds are the main component, grew by 337 percent in the past two years.

With California’s water levels beginning to hit record lows this spring, Singapore-based Olam International, Australia’s largest almond producer, signed a deal to develop 1,480 acres of orchards in New South Wales. Select Harvests Ltd, Australia’s second biggest grower quickly signed a deal to develop green field sites to expand production.

Paul Thompson, managing director of Select Harvests, told Reuters that “It is very easy to say the industry has only benefited from the California drought, but demand is still growing.” He added, “You can see this everywhere as people realize that almonds are a great source of protein and contain no cholesterol, and in America now, almond milk is a bigger market than low-fat milk.”

But the boon for Australian farmers could come to a screeching halt because the El Niño conditions developing in the equatorial Pacific usually result in drier conditions in Southeast Asia and Australia.

The National Oceanic and Atmospheric Administration predicts that there is a more than 90 percent chance that El Niño will continue through the Northern Hemisphere winter 2015-16, and around an 85% chance it will last into early spring 2016. In July, sea surface temperatures anomalies were already at 1.0°C above normal in the central equatorial Pacific Ocean, and in excess of 2.0°C above normal across the eastern Pacific–and still rising.

El Niño events of this magnitude tend to reverse easterly trade winds and push precipitation headed toward Southeast Asia up the U.S. West Coast and Southwest instead. The situation could be especially grim in Australia’s New South Wales, Queensland, and Victoria provinces, where El Niño conditions are also associated with bush fires from drought conditions.

It has been four tough years for West Coast farmers. But with the arrival of an El Niño that was recently called the Godzilla El Niño, it is about to be party time for California almond growers.